Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

What Should I Know About A Stock Before I Buy It?

'What should I know about a stock before I buy it?' This is the question new investors need to ask themselves. What are the things about a stock that I need to know to know what I am investing in? It is an easy question but has many answers. And the answers to the question are very easy to obtain. So here are some:

  • Annual Reports: You need to reed the companies annual reports to learn the new clients they are expecting in the next year, growth from the last, and expected growth for the future. But when you read annual reports, not only do you need to know what they are telling but also what they aren't. Example: If a company for the 2011 annual report has in one of its paragraphs that it will be gaining 3 new clients that will earn you extra money and then you read the 2012 annual report and it talks nothing about how the company made money from the clients or doesn't even mention the clients at all. When you see this you can make a guess that they either lost the client or the project with the clients failed. This is why it is also as important to know what they are not telling you because those things can make you believe that the company will keep making money with a nonexistant client. Obtained: On The Investor Relations Site of a Company.
  • Growth: You need to obtain the growth, but you will ask your self, "Which growth rating is important and how can I tell if this is a good amount of growth?". I will first start with, any growth is already a good thing. Second that all the growth ratings are important but ones like revenue, sales, and income are some of the most important ones, as these growth ratings are showing the growth of value in the company. Obtained: Through most investing sites and more exact on annual reports.
  • Future Projects: The next important part of the company you need to figure out is the future projects and clients that company plans to obtain. These are important as you can read about these on sites other than the site of the company. These sites will most likely help you understand the project and guess if that project will be successful or not. Then clients can be found on the annual reports as companies love to brag about clients that they gained over the year. Obtained: (Projects: On Annual Reports then project look-up sites; Clients: Annual Reports).

Now that you have your research and you decide that maybe the company as growth and good future projects and the annual reports don't seem to be hiding lots of bad things and you think you might want to buy the stock. Now what do you need to know about the stock of a company it buy it?

  • First thing is first, look at analyst ratings, forecasts, and target price. This is just to see what analysts think of the stock and if you get really lucky you will find a site that gives the communities thoughts. This should not make you buy the stock but give you an understanding of how it is thought about. And on big sites that have millions of viewers, even if the stock is a bad investment, it going on the ratings as an A+ could drive the stock up even if it shouldn't.
  • Second look at some charts and look for a historical trend in the stocks price and think of a time when the investment is at the best chance to buy.
  • Next look at its financials and standard ratios. Look for stocks that contain a discounted P/E ratio, as you always want a discount to buy something don't you.
  • Next look at the news surrounding a company, as you don't want to buy a stock that has bad news surrounding it. As bad news not only drives investors away but it usually has to do with bad financials and you don't want a stock with bad financials (And remember the first part of this was about looking for good financial stocks, so if your looking at a stock with bad financials then you obviously didn't do a good enough job).

Now if the stock passes all these tests, by your standards, and you are still interested in buying it, don't just yet. Go back and look at all the second part quickly (like a skim in 2 hours), because if you looked through all this well then it should have taken you 3 days, and things might have changed in that time period. And if it still passes after your quick reading then you should buy it. These are my keys to investing and should work if you follow them correctly.